Getting a Prepaid Expenses Balance

The entries to the balance sheet that this chapter has discussed so far—Cash and Accounts Receivable—are both driven by transactions that occur during the period covered by the balance sheet. Another category of Current Assets covers a subset of a business's resources that span accounting periods. Transactions that occur during the period in question might, or might not, change the value of these assets. But whether such a transaction changes the value of the asset, it usually requires that you make an adjusting entry.

Suppose, for example, that your business uses a postage meter. From time to time, you take the meter to the post office, write a check for a few hundred dollars, and a clerk increases the amount of postage shown in the meter by that amount.